Hong Kong’s Correction Lasts One Day, Week In Review
5 Min. Read Time
Week in Review
- Asian equities were mixed this week, as India underperformed, Hong Kong Mainland China outperformed despite its market holiday on Tuesday, and Mainland China had its best day in 16 years on Monday before entering a market holiday for the remainder of the week.
- The mixed release of September's Manufacturing and Non-Manufacturing Purchasing Managers' Indexes (PMIs) on Monday confirmed the recent economic policy pivot
- On Wednesday, Alibaba announced that, in the third quarter of this year, the company spent $4.1 billion buying back 414 million shares (52 million ADRs), reducing the company’s shares outstanding by 2.1%.
- In our latest video, cultural analyst Xiabing Su investigates just how anxious Chinese investors are to trade stocks again after the National Holiday ends on Tuesday.
Key News
Asian equities were largely higher as Hong Kong outperformed and India underperformed.
Hong Kong opened lower, with the Hang Seng and Hang Seng Tech off -1.31% and -1.88%, but quickly rebounded, closing just off the intra-day highs. Breadth was strong and volumes were 238% of the 1-year average. Normally, the most heavily traded stocks by value would be approximately HKD 5 billion, though the top five stocks traded above that level today. Meituan traded HKD 13 billion.
Growth stocks outperformed as Hong Kong’s most heavily traded stocks by value were Meituan, which gained +4.1% as the founder sold $44.3 million worth of shares, Tencent, which gained +2.45% after buying back 291,900 shares today, and 549,200 yesterday, Alibaba, which gained +3.55% after filing that they bought back 94 million shares, which is equivalent of 11.75 million ADRs (8 HK shares = 1 ADR), Hong Kong Exchanges, which gained +2.4%, and Semiconductor Manufacturing, which gained +29.31% (not a typo).
Healthcare was the top-performing sector as Wuxi Biologics gained +14.46% and Wuxi AppTec gained +11.55% on media reports the company could sell certain US assets to comply with Congress’ efforts to act as judge, jury, and executioner of the companies’ international businesses.
There were varying reports on why semiconductors were so strong, though it is hard to say for certain.
After the close, the EU announced tariffs as high as 45% on Chinese electric vehicles (EVs), despite Germany dissenting. According to Reuters, there were 500,000 EVs sold in Europe in 2023, and another 1 million sold globally. It sounds like this is not a done deal, as the vote was really a negotiating tactic by the EU.
Interestingly, India was off today, and Japan was basically flat; as we have stated, a lot of the money that came out of China went to those two markets, along with US tech. This week, India was off approximately -5%, and Japan was off -4.5% (Nasdaq 100 is -1.5% pre-Friday open). This is a strong indication that Asian investors are pivoting back into Chinese stocks.
Obviously, investors in China are preparing to make a pivot, as a Mainland media source noted investors going to Hong Kong to open brokerage accounts (I posted this on X, @ahern_brendan). That seems a bit extreme! The pivot back to China is likely to occur on geographical lines (China 1st, Asia 2nd, Chinese trading partners 3rd, Europe 4th, US 5th). It is also likely to be dictated by investor type, with the fast money crowd such as hedge funds and individuals can move very quickly. Institutions need to get the investment committee, the board, the trustees, etc., together. A real re-rating of China will take quarters, if not years, as market strategists haven’t upgraded China (yet). Stock analysts haven’t increased their price targets based on the monetary/housing stimulus (yet).
Remember we haven’t received the details on fiscal stimulus just yet. Will that be good news? You bet! China’s economy is like a supertanker, i.e., it does not turn on a dime. The key is more good news and economic data is coming. Big institutions are also like a super tanker as it will take time to shift back into China.
The Hang Seng and Hang Seng Tech indexes gained +2.82% and +4.99%, respectively, on volume that declined -15.73% from yesterday, which is 238% of the 1-year average. 426 stocks advanced, while 67 stocks declined. Main Board short turnover declined -27.74% from yesterday, which is 179% of the 1-year average, as 13% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and small caps outperformed the value factor and large caps. All sectors were positive, except for real estate, which fell -0.02%, led higher by healthcare, which gained +8.71%, information technology, which gained +4.42%, and consumer discretionary, which gained +4.06%. The top-performing subsectors were semiconductors, pharmaceuticals, and diversified financials. Southbound Stock Connect will closed until next Tuesday.
Shanghai, Shenzhen, and the STAR Board are closed until next Tuesday.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.8% |
| Hang Seng Tech | HSTECH Index | 5% |
| Hong Kong Turnover | HKTurn Index | -15.7% |
| HK Short Sale Turnover | HKSST Index | -27.7% |
| Short Turnover as a % of HK Turnovr | N/A | 12.6% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | 8.1% |
| China (Shenzhen) | SZCOMP Index | 10.9% |
| China (STAR Board) | Star50 Index | 17.9% |
| Mainland Turnover | .chturn Index | 0% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 1.2% |
| Japan | NKY Index | 0.2% |
| India | SENSEX Index | -1% |
| Indonesia | JCI Index | -0.6% |
| Malaysia | FBMKLCI Index | -0.7% |
| Pakistan | KSE100 Index | 0.9% |
| Philippines | PCOMP Index | 1.1% |
| South Korea | KOSPI Index | 0.3% |
| Taiwan | TWSE Index | -0.4% |
| Thailand | SET Index | 0.1% |
| Singapore | STI Index | 0.3% |
| Australia | AS51 Index | -0.7% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | 3.26 |
| Communication Services | 9 | 2.25 |
| Consumer Discretionary | 29 | 4.01 |
| Consumer Staples | 13 | 1.36 |
| Energy | 7 | 3.6 |
| Financials | 24 | 2.82 |
| Health Care | 14 | 8.65 |
| Industrials | 18 | 2.67 |
| Information Technology | 11 | 4.37 |
| Materials | 11 | 3.76 |
| Real Estate | 6 | -0.07 |
| Utilities | 12 | 2.73 |
| China Listed | 487 | 0 |
| Communication Services | 13 | 0 |
| Consumer Discretionary | 41 | 0 |
| Consumer Staples | 32 | 0 |
| Energy | 17 | 0 |
| Financials | 68 | 0 |
| Health Care | 45 | 0 |
| Industrials | 74 | 0 |
| Information Technology | 93 | 0 |
| Materials | 80 | 0 |
| Real Estate | 7 | 0 |
| Utilities | 17 | 0 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 2.4 |
| Alibaba HK | 9988 HK Equity | 3.5 |
| JD.com HK | 9618 HK Equity | 7.3 |
| NetEase HK | 9999 HK Equity | 0.3 |
| Yum China HK | 9987 HK Equity | 1.2 |
| Baozun HK | 9991 HK Equity | 3.4 |
| Baidu HK | 9888 HK Equity | 1.6 |
| Autohome HK | 2518 HK Equity | 0.3 |
| Bilibili HK | 9626 HK Equity | 0.4 |
| Trip.com HK | 9961 HK Equity | 7 |
| EDU HK | 9901 HK Equity | 9.5 |
| Xpeng HK | 9868 HK Equity | -0.3 |
| Weibo HK | 9898 HK Equity | 2.8 |
| Li Auto HK | 2015 HK Equity | 3.8 |
| Nio Auto HK | 9866 HK Equity | -0.4 |
| Zhihu HK | 2390 HK Equity | 6.9 |
| KE HK | 2423 HK Equity | 8.3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 7.2 |
| Meituan HK | 3690 HK Equity | 4.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| MEITUAN-CLASS B | 4.1 |
| TENCENT HOLDINGS LTD | 2.4 |
| ALIBABA GROUP HOLDING LTD | 3.5 |
| HONG KONG EXCHANGES & CLEAR | 2.4 |
| SEMICONDUCTOR MANUFACTURING | 29.3 |
| PING AN INSURANCE GROUP CO-H | 4.4 |
| AIA GROUP LTD | 3.9 |
| JD.COM INC-CLASS A | 7.3 |
| CHINA LIFE INSURANCE CO-H | 7.9 |
| XIAOMI CORP-CLASS B | 2.1 |
